London, 07 December 2011 -- Moody's Investors Service has assigned a Provisional long-term
rating of (P)Aaa to the following covered bonds to be issued by AXA Bank
Europe SCF (the issuer), under French SCF Law.
Series 4 -- EUR 1,500,000,000 floating
rate Covered Bonds due 8 December 2021: (P)Aaa; new rating.
RATINGS RATIONALE
A covered bond benefits from (i) the issuer's promise to pay interest
and principal on the bonds; and (ii) if the issuer defaults,
the economic benefit of a collateral pool (the cover pool). The
ratings therefore take into account the following factors:
(i) The credit strength of the issuer based on the credit strength of
AXA Bank Europe rated A2/P-1, acting as sponsor bank.
(ii) The value of the cover pool in the event of issuer default.
The stressed level of losses modelled in event of issuer default (cover
pool losses) for this transaction is 14.9%.
The analysis of the value of the cover pool considered:
- iia) The credit quality of the assets backing the covered bonds.
The covered bonds are backed by Residential Mortgage Backed Securities
notes (the RMBS notes), rated Aaa by Moody's as of the date
of this publication. The RMBS notes are in turn backed by a portfolio
of Belgian mortgage loans originated by AXA Bank Europe. The collateral
score for the cover pool is 0%, consistent with the current
Aaa rating of the RMBS notes.
- iib) The French legal framework, as the covered bonds are
governed by the French SCF covered bonds law.
- iic) The exposure to interest rate risk and the hedging arrangements
in place.
- iid) The over-collateralisation in the cover pool of AXA
Bank Europe SCF. The minimum over-collateralisation level
that is consistent with the Aaa rating target is 14.5%.
Moody's analysis relies on a level of over-collateralisation
of 14.5% on a voluntary basis.
The TPI assigned to this transaction is Probable. Moody's
TPI framework does not constrain the rating as of the date of this publication.
The provisional rating assigned by Moody's addresses the expected loss
posed to investors. Moody's ratings address only the credit risks
associated with the transaction. Other non-credit risks
have not been addressed, but may have a significant effect on yield
to investors.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings only represent Moody's preliminary
opinion. Upon a conclusive review of the transaction and associated
documentation Moody's will endeavour to assign a definitive rating
to the covered bonds.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered
Bond Model (COBOL) which determines expected loss as a function of the
issuer's probability of default, measured by the issuer's
rating, and the stressed losses on the cover pool assets following
issuer default.
The cover pool losses for AXA Bank Europe SCF's covered bonds are
equal to 14.9%. This is based on Moody's most
recent modelling and is an estimate of the losses Moody's currently models
if issuer defaults. Cover pool losses can be split between Market
Risk of 14.9% and Collateral Risk of 0%. Market
Risk measures losses as a result of refinancing risk and risks related
to interest-rate and currency mismatches (these losses may also
include certain legal risks). Collateral Risk measures losses resulting
directly from the credit quality of the assets in the cover pool.
Collateral Risk is derived from the Collateral Score, which for
this programme is currently 0%, reflecting the current Aaa
rating of the RMBS notes.
For further details on Cover Pool Losses, Collateral Risk,
Market Risk, Collateral Score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's EMEA Covered
Bonds Monitoring Overview", published quarterly. These figures
are based on the latest data that has been analysed by Moody's and
are subject to change over time. These numbers are updated quarterly
in Performance Overview published by Moody's.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI)
which indicates the likelihood that timely payment will be made to covered
bondholders following issuer default. The effect of the TPI framework
is to limit the covered bond rating to a certain number of notches above
the issuer's rating.
For AXA Bank Europe SCF's covered bonds, Moody's has assigned
a TPI of Probable.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the credit
strength of the issuer.
The number of notches by which the issuer's rating may be downgraded before
the covered bonds are downgraded under the TPI framework is measured by
the TPI Leeway.
Based on the current TPI of Probable, the TPI Leeway for this programme
is one notch, meaning the covered bonds might be downgraded as a
result of a TPI cap once the issuer rating is downgraded below A3,
all other variables being equal.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances. Some examples might be (i) a sovereign
downgrade negatively affecting both the issuer's senior unsecured rating
and the TPI; (ii) a multiple notch downgrade of the issuer;
or (iii) a material reduction of the value of the cover pool.
RATING METHODOLOGY
The principal methodology used in this rating was "Moody's
Approach to Rating Covered Bonds" published in March 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Hadrien Rogier
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns Provisional long-term rating of (P)Aaa to Series 4 of the Covered Bonds to be issued by AXA Bank Europe SCF
